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2.
Literature Review
2.1.
Issues and Challenging
Turnover is the ratio of employees of an organization who left within a particular period of time with the average
number of employees in that organization during the same period of time (Price, 1977). While, Mobley (1977)
mentioned that turnover is employees’ engagement of certain position who may leave the position and breach the
relationship between employer and employees. In contrast, Currivan (1999) argued that turnover is a behaviour
which describes the process of leaving or replacing employees in an organization.
Turnover may be voluntary or involuntary decision by employees. There is willingness and intention to leave or
an employee is being forced to leave the organization. According to Noe et. al. (2006) voluntary turnover occurs
when employees leave an organization at their own discretion or interest. The intention of employees to leave the
organization due to influence by several factors. Similarly, Egan, Yang and Bartlett (2004) defines voluntary
turnover as an instant or quick reflect and decision of employees to leave the organization. Meanwhile, involuntary
turnover is discharge which decision made by employers to terminate the relationship between employer and
employee. In addition, Allen, Shore and Griffeth (2003) agreed that involuntary does not only about the discharge or
employee termination, it is also includes employees’ retirement, death and dismissal. While Bratton and Gold (2003)
added that involuntary is also due to cost cuts, restructuring and downsizing of organization. Most of the studies
conducted are within the discussions of employees’ turnover factors with its causes and consequences(Arokiasamy,
2013); (Fildago & Gouveia, 2012).
Employees turnover are influenced by many factors. There are many perceptions and views, also rational reasons
that lead to employees’ decision to leave an organization. Most of the studies agreed that job satisfaction is the main
reason why employees leave the organization. In previous literatures, most of the scholars believe that job
satisfaction is related to resignations (Mobley, 1977);(Porter & Steers, 1973); (Price & Mueller, 1986); (Steers &
Mowday, 1981).
In contrast, other studies Spencer and Steers (1981) discovered that there is a strong negative relationship
between job satisfaction and turnover. Mowday, Porter and Steers (1982) also uncovered that job satisfaction is
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Ros Intan Safi nas Munir and Ramlee Abdul Rahman / Procedia Economics and Finance 37 ( 2016 ) 488 – 496
consistently and negatively associated with turnover. Recent studies, (Duraisingam, Pidd & Roche, 2009);(Lee &
Rwigema, 2007) also concluded there is a negative relationship between job satisfaction and employees’ turnover.
2.2.
Cost of Employees’ Turnover
When employees feel dissatisfied at their workplaces, these feeling will be reflected in each individual behaviour,
and will result in less committed to their works, and in turn will lead them to turnover from the organization
physically or mentally. While Tracey and Hinkin (2008) refer, employees’ turnover rates are driven by employees’
dissatisfaction to the job environment which resulted in the reduction of their contribution to their job (Lok &
Crawford, 2004). Many studies have been conducted to analyse the consequences which probably have caused
employees in deciding to quit. This includes the evaluation of work environments which leads to the intention of
seeking other job opportunities (Lee, 1988). Often, turnover costs affect organizations (Tracey & Hinkin, 2008);
(Connolly & Connolly, 1991). Employees’ turnover may directly or indirectly affect organizations’ costs and
performances. Past researchers agreed that employees’ turnover cause negative effect on operating performances of
organizations (Dalton & Todor, 1979); (Bluedorn, 1979), these include high cost to organization. When an
employee leaves their organization, their replacement will be required. Therefore organizations are required to
recruit and train new employees effectively (Fildago & Gouveia, 2012). Time allocation necessitated management
in organization to reschedule and plan for new series of training for employees’ development. Consequently,
employees’ turnover will waste the time taken to recruit, train and generally administrate (Rondeau & Wagar,
2006);(Katcher & Snyder, 2007).
Employees’ turnover significantly incurred direct cost in terms of recruiting, poor production practices and
reduced standards as well as high replacement and training costs (Rondeau & Wagar, 2006). In contrast to indirect
costs effect lowered productivity and competiveness of the growth and success of organization (Abdullah et. al.,
2007). At this point, according to Ciavenato (2001), cost that incurred from employee turnover can be divided into
three levels, such as primary, secondary and tertiary. Primary cost is defined as minor cost that effects the
organization such as recruitment and selection cost, integration and separation cost that still less burden to
organization. While, secondary cost is the cost with high risk to organization. The risk such as, production effects,
staff attitude, extra labor cost and extra operating cost. Finally, tertiary costs represent the major effect and high risk
to organization, such as extra investment costs and losses in business.
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